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The State Fund provided a workers’ compensation insurance policy to Citiguard. State Fund conducted an audit of Citiguard’s payroll records and determined Citiguard owed additional premiums for the first policy period.

State Fund claimed Citiguard failed to pay its back premiums and failed to comply with an audit in connection with the second policy period. State Fund calculated the premiums it claimed Citiguard owed and sent Citiguard an invoice for that amount.

After Citiguard failed to pay the claimed back premiums, State Fund assigned the debt owed by Citiguard to a collections agency, Creditors Adjustment Bureau Inc., for collection.

On August 17, 2017 Creditors filed a complaint against Citiguard which alleged Citiguard breached the contract by failing to pay its premiums for the two policies. The complaint sought $166,986.20 in damages, plus interest, costs, and further appropriate relief.

On August 28, 2017 a process server served the summons and complaint on Sami Nomair, the owner and registered agent for service of process for Citiguard, by substituted service on Pauline Chavez, the “person in charge,” at Citiguard’s business address at 9301 Corbin Avenue, suite 1800, Northridge, California 91324 (Corbin address). On August 29, 2017 the process server mailed copies of the documents to Citiguard at the Corbin address.

On October 13, 2017, after the deadline to file a responsive pleading had passed, Creditors mailed a letter addressed to Nomair at the Corbin address, advising him Creditors would request a default if an answer was not filed within seven  Creditors filed a request for entry of default, which it served on Citiguard (not directed to Nomair) at the Corbin address. The court clerk entered the default on October 31. On November 8 Creditors filed a request for entry of judgment, which it served by mail on Citiguard at the Corbin address (also not addressed to Nomair). Creditors dismissed the Doe defendants on the same day. On November 28, 2017 the trial court entered a default judgment against Citiguard.

On March 13, 2018 Citiguard filed a motion under Code of Civil Procedure section 473, subdivision (b), to vacate the default and default judgment on the grounds of mistake, inadvertence, and excusable neglect.

In his declaration filed in support of the motion, Nomair stated, “I was not aware that a lawsuit had been filed. I was shocked and surprised to find out that there was a default judgment taken against my company.” Nomair declared he was “rarely in the office from mid-August to mid-September” because he was caring for his disabled aunt.

After a hearing on April 25, 2018, the trial court granted Citiguard’s motion and vacated the October 31, 2017 default and November 28, 2017 default judgment. Creditors appealed the order. The Court of Appeal affirmed the trial court in the unpublished case of Creditors Adjustment Bureau v Citiguard.

“Notwithstanding conflicting evidence presented by Creditors, the trial court did not abuse its discretion in granting Citiguard’s motion for relief.”